The good news or the bad news? Neil Woodford at his offices.
Star fund manager Neil Woodford barely had time to enjoy a bit of good news on one of his holdings, Capita, today before it was spoiled by bad news on another – a US biotech firm that has hit the rocks.
Woodford holds Capita in his Equity income fund and would have enjoyed seeing its share price jump 13 per cent today, as investors backed a discounted cash call.
In January, Woodford took a reported £40million hit when the outsourcing firm suspended its dividend.
But it was not long before he suffered another setback when shares in Prothena plunged 70 per cent after the failure of a crucial clinical drug trial.
Woodford Patient Capital Trust has a 9 per cent stake in the firm and saw its shares dive by 10 per cent.
Prothena is additionally listed on the Woodford Equity Income fund and Woodford Income Focus fund.
But Mr Woodford said he stood by the young biotech company: ‘Over recent months, Prothena’s share price has been volatile with the market pricing in the prospect of a trial failure but, despite this, we should expect the market to react badly in the short term to today’s announcement.
‘Such trial results are symptomatic of early-stage investing, however, and with pecific regard to biotech companies, trial outcomes are binary.
‘Nevertheless, the result of this trial is undoubtedly a blow and we will be working with the company and its management team on its strategy.’
Prothena is listed as the second biggest holding in Woodford’s Patient Capital trust
With a little patience: Investors in the Patient Capital trust have seen it sink since launch – it regained some ground recently but after today’s blow will fall back again
Prothena said it was halting development of NEOD001, a drug that it had hoped would treat a rare disease called AL amyloidosis, as it failed to meet its ‘endpoints’.
The Patient Capital Trust, which was launched three years ago almost exactly, has not produced the returns that investors had come to expect from Mr Woodford’s investment vehicles.
At 76p – after a drop of 9p on the Prothena news today – it is 28 per cent down on its launch price of 105p.
Mr Woodford said that Prothena has ‘options’ in other areas and pointed to $500million on its balance sheet, describing it as ‘very well-funded’.
Mr Woodford’s Equity Income Fund was in March forced to defend its strategy after it got the boot from a key sector list when it fell short on a benchmark measure for returns.
The £7.7billion LF Neil Woodford Equity Income Fund had failed to deliver a higher income than the FTSE All Share Index over a rolling three-year period, having come in just shy of the 3.6 per cent yield threshold at 3.5 per cent.
The fund has been hit in recent years by disappointing performances from holdings such as Imperial Brands, Provident Financial, AA and AstraZeneca.